ECN Forum
Posted By: iwire Contract, Flat Rate, T&M. - 09/23/06 11:08 AM
OK guys I poke around this forum even though I am not a business owner.

I have noticed that the terms Contract, Flat Rate, T&M get used a lot and I don't think we all use them to mean the same thing.

Maybe it is I that use them wrong, I would like to provide my definitions of these words.

Say a customer calls and asks us to install 15 hi hats and 20 receptacles.

We could handle this a number of ways.

T&M, Time and Material. This is work that we charge out each and every hour used, including travel time. We also charge for each and every item of stock.

Many times we do this after giving the customer a "Price not to exceed" for a given scope of work.

Another way to handle it is by contract price.

Contract Work This way of working we carefully consider all the costs involved, make a site visit, check the specifications etc and provide a total price for the job.


Finally there is "Flat Rate"

Flat Rate To me this means we have a set price per item, we don't go to the site, we don't carefully price shop. We simply say each hi hat fully installed is $125, each switch, is $75, each outlet $100 etc.

With flat rate we can provide an instant number but it is a gamble that sometimes we may lose but most time the customer will pay more than if the same work was done contract or T&M.

Anyway do my own definitions fit in here?

It strikes me what LK calls "Flat Rate" is better described as "Contract Work"

Now the problem LK might have with this is that he is required to always have a contract, I suggest that (at least in my area) "Contract work" work is not the same at all as "Flat Rate"

This in spite of the fact that both contract work and flat rate let the customers know in advance the total cost of the project.
Posted By: Tiger Re: Contract, Flat Rate, T&M. - 09/23/06 01:27 PM
In my business there isn't any difference between flat rate and contracting. I use the per item rates to calculate the contract price.

As an example, say I have a price for pulling power to the first can or switch, add that to the switch leg and dimmer, add a can, trim, bulb task multiplied by 6 cans and I have a total price. I present it as 6 cans on a dimmer.

On larger jobs, I'll do a T&M double-check on the final price, but it's still offered as a contract.

I'm all for anything that makes it simpler for me to figure & simpler for my client to understand.

Dave
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/23/06 06:33 PM
"It strikes me what LK calls "Flat Rate" is better described as "Contract Work"

The term flat rate, is nothing more then a contract price, many service providers, such as auto repair, appliance repairs, and others, have been using a flat rate for years, they get this flat rate from using actual or book rate labor hours, then adding material costs, along with a desired profit, the same way we put together a contract.

"Flat Rate To me this means we have a set price per item" we don't go to the site, we don't carefully price shop. We simply say each hi hat fully installed is $125, each switch, is $75, each outlet $100 etc."

There is no set price per item, the price sheets are only meant, to be a guide, in figuring your final contract price, we do go the the site, and look at the job conditions, and carefully adjust the sheet price according to each job.

"With flat rate we can provide an instant number but it is a gamble that sometimes we may lose but most time the customer will pay more than if the same work was done contract or T&M."

If the flat rate sheets are used the proper way, you can give an instant number, that is not a gamble, and the customer will most likely pay less then T&M.

Now with that said, many do not understand how flat rate systems work, they work the same as a contract, except you have the information for accurate estimating in a book of pricing sheets.

The problem is, some do not know how to use the pricing sheets, and others use sales sheets, with inflated prices, and in this case your comment on "the customer will pay more than if the same work was done contract or T&M." is true.

A properly managed flat rate system, not only works well, but it can save both the contractor, and customer money
Posted By: iwire Re: Contract, Flat Rate, T&M. - 09/23/06 06:41 PM
Les I do not agree your idea of flat rate matches the flat rate system of mechanics.

Not saying your doing anything wrong or improper.

I just do not agree with the terms you use, we provide contract work, we do not flat rate any jobs.
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/23/06 07:05 PM
"we provide contract work, we do not flat rate any jobs."

If you give the customer a contract, you are giving them a flat rate to do the work.

You do the contract estimate in the office, we do the contract estimate on site.


[This message has been edited by LK (edited 09-23-2006).]
Posted By: Jps1006 Re: Contract, Flat Rate, T&M. - 09/23/06 08:17 PM
The consistency and accuracy in the use of terms is important, especially in the public and private exchange of ideas that this forum so capably facilitates.

T&M is pretty clear and fairly undisputed in terms of what it is referring to. I'm sure there are slight variations as to how some apply the concept, whether a ballpark estimate to accompany, or a not to exceed price, whether one marks up the material etc.

When the term flat rate is used, I picture a process that uses what LK calls "actuals", a book that has the tasks broken down with labor units assigned based on tracking how long it has taken in the past. You can assess the job in person or over the phone if accurate and pertinent information can be collected. Then you assemble the price using the variables:

5 remodel cans on switch

1st (4) $150 each
5th can $125
plaster adder per can $40
no attic access above adder per can $20
wall fish switch $125
plaster adder $20
feed power from unfinished basement $65
site visit to estimate $55

Total = $1290
Then you make sure they understand that some plaster repair and paint is likely.

All those items can vary and you would assemble your final price accordingly.

The use of the term "contract pricing" is where it gets a little vague. (One could even consider the agreement to the terms of T&M as a contract, leaving the "pricing" part of the term as a variable") It is my impression that it somewhat universally accepted that a contract price means a fixed price for a fixed work scope. It would differ from flat only in how the price is figured. One could figure up a contract price using a flat rate strategy, which would make it both a contract price and a flat rate. Or one could arrive at a contract price by guessing what the labor and the material would come in at using more of a T&M model, but then throwing a little on top to account for risk. A contract price, but not necessarily flat rate in terms of the process used to arrive at the contract price.

[This message has been edited by Jps1006 (edited 09-23-2006).]
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/23/06 09:05 PM
"Or one could arrive at a contract price by guessing what the labor and the material would come in at using more of a T&M model,"

That being one of the problems, rather the learn the estimating process, some guess the amount, or use past T&M figures, and they may look to some of the flat rate systems for an easy way of pricing, however to use a flat rate pricing, it still requires some estimating skills, one of the advantages of using price sheets, is you are able to put a price together in the field, after look at the job, and all the conditions



[This message has been edited by LK (edited 09-23-2006).]
Posted By: iwire Re: Contract, Flat Rate, T&M. - 09/23/06 09:22 PM
Quote
If you give the customer a contract, you are giving them a flat rate to do the work.

Yes....and no.

We just have different views of what flat rate pricing means.

You have said many times that people just do not understand flat rate pricing.

I submit that maybe it's because we all have different views of what the term "Flat Rate pricing" means.
Posted By: Tiger Re: Contract, Flat Rate, T&M. - 09/23/06 09:46 PM
I guess I'm not following how this is anything other than a play on wording. With flat rate and contracting the client gets the final price before the work starts. The exception would be something like finding a splice in a wall you open up. The form I use with on-site "flat rate" bidding is nearly identical to my contract in language. The main difference is that it has lines to write in since I don't have a laptop and printer on the truck.

I never bid work that I don't see. With cans, is there a spacious attic, tight attic, or remodel from below? Is it in the living room with a high sloped ceiling. You have to adjust with any method of estimating, but you end up with a set price.

With T&M you have a set rate, but the end result is variable which creates stress during the installation and for the client when they get the surprise at the end. Clients are much more likely to negotiate with T&M invoicing than flat rate or contract.

Dave
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/23/06 10:18 PM
"I submit that maybe it's because we all have different views of what the term "Flat Rate pricing" means."

I agree, there are different views, an your post, is a good topic for discussion, not only different views, but the way flat rate is applied, can be confusing.
Posted By: Jps1006 Re: Contract, Flat Rate, T&M. - 09/23/06 10:54 PM
I would sum it up this way...

A flat rate price could always be considered a contract price, but a contract price is not necessarily a flat rate price.

When some one in the industry refers to a flat rate they imply a more specific method of arriving at the final price, more specifically some of the methods described above. A contract price can be arrived at using various methods, one of which could be flat rate or some other way.
Posted By: Dnkldorf Re: Contract, Flat Rate, T&M. - 09/23/06 11:38 PM
Flat rate would be like a Chilton manual. Manual with pre-determined prices based on what ever you want to charge.


Contract price is determining how long a job takes in hrs X hr rate, adding material and profit.


T&M is self explanitory.

IMO only
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/24/06 12:08 AM
"Contract price is determining how long a job takes in hrs X hr rate, adding material and profit"

So when you complete the contract, you give the customer a flat rate, a fixed price, a total amount, a final figure, contract total, whatever wording you like, flat rates prices are the final amount of an estimated job, you present the customer with a contract on flat rate work.

A flat rate price is figured the same as a contract price, a work sheet is used, with labor units, and material prices.

How you present it to the customer is the only difference, Mr Jones this is our contract price, Mr Jones this is our flat rate.


Same dog different trick.

Companies have made a business, out of offering estimated prices printed in book form, and billing it as Flat rate books, Flat rate software, and some call it a system, it is no more then job assemblies indexed for easy access, with this information you can write your contract, for some that find estimating jobs, either time consuming, or difficult, price sheets may be a great way to go, to write your contracts.



[This message has been edited by LK (edited 09-23-2006).]
Posted By: renosteinke Re: Contract, Flat Rate, T&M. - 09/24/06 12:24 AM
It occurs to me that, on a routine and well defined job (say, replacing a box, then installing a ceiling fan), that the figures off the "flat rate" sheet, and the price as figured by T&M, ought to be fairly close to one another.

With a known task, it's possible to tell the customer ahead of time what they can expect to pay. Customers generally like this.

Of course, tasks are not always so clearly defined. For example, a comercial remodel goes through multiple changes, with walls being added, removed, and shifted as the job progresses. The, the equipment that arrives is different from what was ordered....

These are the sorts of jobs that T&M excell at. On the flip side, if the job involves substantial shop time, and other work out of view of the customer, T&M can easily lead to disputes.
Posted By: PE&Master Re: Contract, Flat Rate, T&M. - 09/24/06 03:06 AM
I believe the type of business would help define whether you use flat rate or contract. I'm not talking about larger jobs, say over $1,000, you need a contract signed, and 50% down for that work.

Service contract work is more for 1-2 man shops where the owner does most if not all the field work. He can swag a price for the job and confirm his price once on site. He don't need a book 'cause it's all in his head. Granted a large shop can have an estimater who would give nothing but quotes but I've found this is not advantageous for a new business, too much overhead. Empower the man in the field and trust him, advise him when needed.

Flat rate is required when the owner isn't doing most of the field work. He must transfer his pricing experience to the employees. Most employees (electricians) are not comfortable shooting from the hip with quotes and will typicall underestimate the time it takes to do a job. I believe they're more comfortable with a (flat-rate) book to use as a go-by for pricing. This helps take them out of the price equation and the customer is not thinking of dollars/hour but can he afford to do the job or not.

You get your tires balanced and they charge you a flat fee, not by the number of weights they add to each tire. You go to a restuarant and buy off of a flat rate menu - not how long it takes the chef to cook your food.

T&M is a loser in most cases for service work. You tell the customer you charge $95/hour, that's $180,000 per year in his/her mind. They don't make this much why should you? Though we know billable time doesn't always relate well to hours spent working. It's almost impossible to include all the misc. materials you use on a job and it's nuts to waste time writing down every screw and plastic anchor you use. You charge them $4.00 for a plug that they cna by at the farm store for $1.25. They're no fools.

I started as T&M and then migrated to giving prices (quotes/contracts). I was hanging two ceiling fans an hour, charging the customer $100 for the 'hour' and was going broke fast. Changing to flat rate and canning some under motivated employees has turned my business around in 6 months. It's also well worth your time to allow yourself set hours to collect delinquent accounts.
Posted By: macmikeman Re: Contract, Flat Rate, T&M. - 09/24/06 05:54 AM
I don't offer my customer's a T+M price. I also don't offer my customers a "flat rate" price. Now I call it "Upfront Pricing" which I saw in the yp of a true business genius operating locally. This simple wording change from "Flat Rate" helped alot. This seems to go over with potential customers much nicer. My thanks to the guy I learned from.
Posted By: Dnkldorf Re: Contract, Flat Rate, T&M. - 09/24/06 11:40 AM
Here's another question people would have different views on.

What is service work?

Does service work include installations, or just repair of existing equipment?

Or does everything you do be considered service work because your providing a service?
Posted By: iwire Re: Contract, Flat Rate, T&M. - 09/24/06 01:39 PM
Quote
Same dog different trick.

In your view yes, in my veiw no.
Posted By: electrictim510 Re: Contract, Flat Rate, T&M. - 09/24/06 05:04 PM
Man...looks like i found this subject a little late. One of my favorite subjects,so I will have to comment [Linked Image] I have worked for a few flat rate companies and I think the word flate rate might be a generic way to bid small jobs. Like a "fancy way to say "You will pay only this amount Mr.Customer. This system makes $$$ by making the customer feel at ease that they wont get some hourly guy taking his time at an hourly rate. So when I think of flatrate I think of someone giving a bid price so they can make better money on this small job.
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/24/06 06:14 PM
"This system makes $$$ by making the customer feel at ease that they wont get some hourly guy taking his time at an hourly rate."

It may be, the word SYSTEM is why people have a different view.

Companies selling contract pricing, as a system, as if it was some new way of doing business.

Try this, "This CONTRACT makes $$$ by making the customer feel at ease that they wont get some hourly guy taking his time at an hourly rate."





[This message has been edited by LK (edited 09-24-2006).]
Posted By: macmikeman Re: Contract, Flat Rate, T&M. - 09/24/06 07:55 PM
quote"So when I think of flatrate I think of someone giving a bid price so they can make better money on this small job."

Bingo! That my friend is the reason we have this here great country of ours. A great capitalist system.
Posted By: TNSunny Re: Contract, Flat Rate, T&M. - 09/24/06 08:19 PM
Well, considering that I do service work and use both flat rate and contract prices - I will submit that they are very similar but different.

For example, when doing "ordinary" things - such as changing out a ceiling fan - I use flat rate. That is, I look in my price book and then tell the customer it will be $65.00 to change out one ceiling fan, and $50.00 each additional fan. I do the same thing with other "simple" work, such as running in a single circuit. My self-made book tells me how much to charge to install an Old Work box, how much to charge for a 20-A receptacle, cover plate, and wire per foot. Add them up to get the total price (and each thing is itemized on the work order/invoice for the customer to see and sign off on.)

On the other hand, I do other jobs that, if I used my flat rate system, I would charge far less for than when I use a contract price. For example, I repaired an outdoor service this past week that was damaged in a storm. My flat rate price for this repair would have been around $700.00. That's materials with markup plus $100.00/hr labor. However, because I know that most electricians in my area charge more for this work than I do for my flat rate, I went ahead and gave a "contract price" for $1,000.00. In other words, I did not itemize the prices for each individual assembly or component. I simply listed "Repair 200-A service damaged by storm" and gave a total price of $1,000.00.

Now, some might consider this to be "price gouging" or some other nasty term - even though I normally charge this price for this work (i.e. I did NOT inflate the price due to it being an insurance claim or storm damage). But in my opinion, it is simple economics. The market in my area will bear this price for this work, and thus I'll charge it. A free market always sets the price - not the contractor. I see no need to charge less for the same work just because my book would indicate that I can do the work for less.

So, "in my book" :-) there is a bit of a difference between flat rate and contract pricing. Flat rate is always based on material cost with markup plus labor. A contract price can be any price the contractor wants it to be and for any reason.

Kevin
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/24/06 10:03 PM
Ok, i give up, everyone does have their own idea on how flat rate works.

"Flat rate is always based on material cost with markup plus labor. A contract price can be any price the contractor wants it to be and for any reason."

And flat rate, can't be any price you want it to be? The whole idea of using rate sheets, is to give you that ability to adjust your prices, the price on the sheet is only a guide, you make adjustments for job conditions, and then giver them a contract price, or flat rate, or up front, or any other name that you like.

"My self-made book tells me how much to charge to install an Old Work box, how much to charge for a 20-A receptacle, cover plate, and wire per foot. Add them up to get the total price (and each thing is itemized on the work order/invoice for the customer to see and sign off on.)"


Does you self made book, have your indexed pricing, with your overhead adjustments, does it have the sales tax adjustment, for service work, can you adjust your assembly price, with add on tasks in the field, is your material cost updated.

"and each thing is itemized on the work order/invoice for the customer"

This sounds more like T&M

Sunny,
I am not saying what you are doing is wrong, if it works for you then, that is great, this discussion is more about the term Flat Rate, and how others view it, so your input is important.

___________________________________________

"I don't think we all use them to mean the same thing."

Bob called this right, from the beginning, every does have their own view, on what flat rate is.




[This message has been edited by LK (edited 09-24-2006).]
Posted By: Tiger Re: Contract, Flat Rate, T&M. - 09/25/06 12:11 AM
One of the good reasons for giving up T&M is to avoid those time-consuming itemized invoices. My invoices read something like "Recessed Lighting Installation per Service Work Order".

Dave
Posted By: Dnkldorf Re: Contract, Flat Rate, T&M. - 09/25/06 12:40 AM
Time consuming invoices?

Mine read labor, and material. 2 lines

I think it is important for these discussions to state whether this discussion is for resi work, commercial work, or industrial work, from the beginning.

Most if not all of you doing resi, seem to think T&M doesn't work, can't work and does not make money.

However, I am sure bob and a few more, will agree with me. T&M may be the only way to do some jobs. And it does make money, or we wouldn't do it.
For the record, I am referring to industrial and large commercial work.
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/25/06 01:07 AM
"For the record, I am referring to industrial and large commercial work."

Most of our industrial, and commercial work is contract, bid work, unless is was a service call, or contracted services, then we use T&M.

T&M can, and does produce income, when used with the right project, such as long term building maint. contracts, some building management will want a contract price, and others will accept T&M, so it's is not a cut and dry deal.
Posted By: Tiger Re: Contract, Flat Rate, T&M. - 09/25/06 01:21 AM
Check the profile Dnk. Go to my website...Residential Specialists with 30 homeowner testimonials.

I meant itemized as in 7 J Boxes, 15 Cans, 15 Trims, 15 Bulbs, 50' of 1/2" emt, dimmers, breakers, etc. with individual prices. By the way, mind if I charge you hourly for the time I'm writing up this tedious invoice?

Dave
Posted By: macmikeman Re: Contract, Flat Rate, T&M. - 09/25/06 02:18 AM
Here is my observation, although I never really saw it like this until about 2 years or so ago. Do you know of any large building, hospital, airport, bridge, highway, or shopping mall that was built using T+M for a basis of payment? What do you think the owners of those projects would say if the contractors came to them and said that building those above items contained too many unknowns and variables, such that it was too risky to build those projects unless they paid T+M. Heck no, they bid them and build the risk into the bid. And small jobs aren't really any different. We just need to START providing for those contingency's in all our bids, and not fall all over each other trying to lower the bids to beat the other guy's bid. Big jobs have good profit built in for the company, small jobs should too.
Posted By: mahlere Re: Contract, Flat Rate, T&M. - 09/25/06 02:30 AM
Please do a search on the term "flat rate" in regards to residential and light commercial service work (all trades)

LK's definition of (paraphrasing) flat rate being the same as contract pricing, is the accepted industry standard. Of the 500+ contractors that I know who use flat rate, that is the definition they would all give you.

So, no offense to anyone, but whether you agree with that definition or not is quite irrelevant. It's like saying "I don't agree that a plain pizza is generally dough, cheese and tomato sauce"

There will always be variations, but any contractor who uses flat rate pricing will generally follow the principles LK set forward.

PE did a good job of explaining the real benefit to a flat rate manual (employees)

macmike makes a great point with his last post.

call it what you want, but more and more customers simply want to know what things will cost before you do them. however you figure out that price is up to you.
Posted By: iwire Re: Contract, Flat Rate, T&M. - 09/25/06 10:34 AM
OK I must be wrong because mahlere said so and he is never wrong....just ask him. [Linked Image]

I will tell the owners of the company I work for that we are no longer electrical contractors.

We are now electrical flat raters.

We do give the cutomer a set price, I would not say we arive at that price by 'flat rate'

Bob


[This message has been edited by iwire (edited 09-25-2006).]
Posted By: mahlere Re: Contract, Flat Rate, T&M. - 09/25/06 11:20 AM
bob, now you are learning.

realize flat rate - as a term used by the trades- is nothing more than a manual (yes, specifically a written manual) that contains the average prices for particular jobs. These prices could've been determined by actual past bidding processes or looking over a bunch of past T&M jobs.

But it's based on actual costs and historical times for given tasks.

now, if the company you work for operates in a way that someone other than the installers goes and looks at a job, formulates a price, submits it, then the installers go in a do the job, it's not far off from how we flat-raters work.

the difference is, our installers look at the job, then using our flat rate manual (which gives them a basis for their pricing) they determine how best for them to perform the task, price it accordingly (using the manual as a reference - not as an absolute) submit the price on the spot, and if approved, perform the work.

It saves us at least 1 trip and potential miscommunication between the estimator/salesman and the installer.

But there is no set price for our tasks. And our book prices are different than LK's, and everyone else out there.

No offense meant Bob, but if you notice, I only stick my nose into certain topics. They are the topics I know. So, you can respond the way you did, or you can do research, or you can realize that I have no reason to feed you BS about this topic. Doesn't do me one damn bit of good to diseminate misinformation about it. The more guys in the country that understand and use flat-rate (upfront pricing, contract pricing, predetermined pricing, already known pricing, no suprise at the end of the job pricing, no SWAG pricing, etc) the better it is for me.

So, I ask one question, why is it that when someone doesn't know about a subject, they ask a question, but if they don't like the answer from people who know the answer, they get defensive and argue with them?

LK presented it accurately. PE added to it greatly. I didn't say anything different. I simply added that any flat rate contractor I know would agree with LK's definition. But, apparently 500+ contractors are wrong. No problem. I'll get on the phone and tell them.

Good luck and have a safe day at work.
Posted By: iwire Re: Contract, Flat Rate, T&M. - 09/25/06 11:44 AM
Quote
So, I ask one question, why is it that when someone doesn't know about a subject, they ask a question, but if they don't like the answer from people who know the answer, they get defensive and argue with them?

That is human nature.

You yourself fall into the same trap often.

Why is it you feel your way is the only way?

I have read many of your posts and your knowledge of the business greatly exceeds mine. [Linked Image]

The trouble I have is this, I have never seen you even remotely suggest that your way is not the only way.

Now unless your hanging with the Bill Gates crowd it is my opinion that your views are not as perfect as you like to think.

What I do know is that with all the jobs we do we never have refer to them as 'flat rate' and the company while having ups and downs is doing quite well and takes great care of us all.

My point in this thread has not been to change anyones mind but to point out that when someone says 'You don't understand flat rate' that in reality we all don't use the term flat rate the same way.

Do some Internet searching, there is no common definition of flat rate there are dozens of different uses of those terms.

Here is one that matches my definition of Flat rate

Quote
flat rate
Definition

A price per unit which remains constant regardless of the total number of units purchased.


Now is that what we do?

Do you charge the same price per unit for 5 hi hats as you would for 500 hi hats?

I doubt it.


Work safe, Bob

[This message has been edited by iwire (edited 09-25-2006).]
Posted By: Dnkldorf Re: Contract, Flat Rate, T&M. - 09/25/06 11:56 AM
Here is an interesting quote, I don't know who said it.

"If you have to tell the world how great you are....your probably not"
Posted By: mahlere Re: Contract, Flat Rate, T&M. - 09/25/06 02:16 PM
Bob,

you should look harder. I've conceded that point numerous times, even you dnk.

Here is a question for you:

A few parameters- primarily residential market, customer wants to know a price up front (How much is it going to cost?) and 20 technicians in 20 trucks, each performing an average of 3 calls per day, with a job average of $450. Small "service" work.

Is it economically feasible to have estimators go to each job and price it up, then have installers come by later and perform the work? Or to have the 20 techs calling the estimator from the field and try to explain the problem over the phone and get a price?

Or does it make more sense to arm each technician with a manual that will guide them to pricing each job correctly, on the spot, and perform the work? Thus, saving the customer money, due to only having to make one trip. Saving time and increasing profit for the company.

Remember, this is primarily residential, small projects/service work, not owner operated.

But, let's make a few things clear.

Flat rate is not my system
start your research here:

this guy is basically the one who started it. www.nspgweb.com www.flatratepricing.com

here are a few more who have perfected the system www.maiosuccesssystems.com www.upfrontprice.com

here are a couple of groups who use the flat rate system everyday with success www.nexstarnetwork.com www.youresi.com www.plumberssuccess.com www.mrelectric.com www.mrrooter.com www.benfranklinplumbing.com www.mikediamondservices.com

Here are some people who have written about this topic and are much better versed than I am
Ellen Rohr - www.barebonesbiz.com
Al Levi - www.appleseedbusiness.com
Charlie Greer - www.hvacprofitboosters.com

Here are a couple of your fellow contractors who were smart enough to do something other than argue with people on message boards www.catalystservicemarketing.com www.ccesllc.com

My point is, your notion of flat rate and the industries definition of flat rate are not the same. If you want to tell guys who use a flat rate system that they are not doing what they are doing (huh? read it again, it actually describes what is happening in this thread) that is up to you.

Your company, which is quite impressive, doesn't appear to touch single family residential service. So please, accept that LK knows what he's talking about. Accept that PE Masters and Tiger (guys who do residiential and light commercial service all day everyday) know what they are talking about.

None of them, myself included, are telling you that they way your company runs it's business is wrong. It's a different animal than what they run. Hell, I've even told dnk that we do some T&M work for our commercial customers. I've also told him on numerous occasions, that I personally have never come across a situation where, if actually understood and used properly, flat rate could not be used.

Bob, as I said earlier, take a look at my posts from anywhere. You'll notice that I don't stick my nose into too many places. When I do, I can usually back up any opinions I may have. And lastly, I am not one to cater or cowtow.

Take as you like, do as you wish. I wish you and your company the best of luck.

And dnk, since you are fond of quotes, here is one for you:

"It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt." - Mark Twain

I have avoided responding to you and I have kindly asked you to avoid me. This discussion was between bob and I.




[This message has been edited by mahlere (edited 09-25-2006).]
Posted By: iwire Re: Contract, Flat Rate, T&M. - 09/25/06 02:29 PM
Why do you feel the sources you picked are more relevant than sources I can find?

Admit it, there is no official definition of flat rate.

As far as anyone inventing 'flat rate pricing' that is as much bull as Gore inventing the Internet. They may have come up with a system they call flat rate and you may accept that is the only flat rate system but I do not.

"Flat Rate" is a term used in many different ways in many different industries.

To each their own, I am certainly not suggesting anyone change their business practices.

I am trying to wake some up to the fact that the term "Flat Rate" is not the same to everyone and no matter how much you try you can not make it so.


Bob
Posted By: mahlere Re: Contract, Flat Rate, T&M. - 09/25/06 02:43 PM
good luck bob.
Posted By: iwire Re: Contract, Flat Rate, T&M. - 09/25/06 02:53 PM
Thanks but I don't need luck, I have trade skills.

I have no interest whatsoever in running a business, way to much work. I can't imagine the pressures of having to keep all the employees working....I would never be able to sleep.

That is way I have a lot of respect for those that do step out and open a business.

Bob
Posted By: mahlere Re: Contract, Flat Rate, T&M. - 09/25/06 03:04 PM
you know bob, up until about 6-7 years ago, I wanted to be the best electrician I could be. I'm a very competetive person with myself. But about that time, I realized that it didn't matter if I was the best damn electrician in the world, I needed to become the best electrical contractor I could be. Once I determined that there was a difference, I saw things completely differently. I realized that I no longer wanted to be an electrician, i wanted to be a contractor.

Do me a favor, I edited my post. Please reread the beginning where I pose a question. Maybe it will make sense, let me know.

Erik
Posted By: iwire Re: Contract, Flat Rate, T&M. - 09/25/06 03:29 PM
Quote
I'm a very competitive person

No kidding. [Linked Image]

I am 42, my fondness for leaving work behind at quiting time far exceeds my need to be the best EC, I doubt that will change.

I work to live, I do not live to work. [Linked Image]

Not to say I do not give 100%, I actually made a service call on last vacation as it made good sense and the people over me appreciated it.

Now was it this question?

Quote
Is it economically feasible to have estimators go to each job and price it up, then have installers come by later and perform the work? Or to have the 20 techs calling the estimator from the field and try to explain the problem over the phone and get a price?

Or does it make more sense to arm each technician with a manual that will guide them to pricing each job correctly, on the spot, and perform the work? Thus, saving the customer money, due to only having to make one trip. Saving time and increasing profit for the company.

I would call what you describe above as flat rate.

That is not the description I get from LK.

It appears to me that LKs position is anytime you give a customer a set price ahead of time that is flat rate.

I don't agree with that, perhaps I have misunderstood LKs position.

I also have a problem with the assumption that your flat rate method always saves the customer money or even that my goal is to save the customer money.

My goal in the field is to make money for the company and leave the customer satisfied / happy but not necessarily with a lower bill.

With honest, hard workers T&M will usually provide a lower bill to the client however I fully understand and agree that many people are not comfortable with T&M. Heck if I hire a plumber to work at my home I would want to know up front what the total will be.

Bob




[This message has been edited by iwire (edited 09-25-2006).]
Posted By: A-Line Re: Contract, Flat Rate, T&M. - 09/25/06 04:53 PM
In my opinion the term "Flat Rate" could be used in many ways.

For T&M if you charge $80 per hour you could say you have a "flat rate" of $80 per hour. The hourly rate doesn't change but the price does depending on how long it takes.

For unit pricing you could say you charge a "flat rate" of $80 per fixture for installation. The price doesn't change but the hourly rate does depending on how long it takes.

The difference in the two examples is that in one you give a "flat rate" per labor unit and the other you give a "flat rate" for each fixture.

The hourly flat rate price will result in a variable final price.

The per fixture price will result in a fixed final price.

In my opinion both could be considered a flat rate price.

Example: We have a flat rate price of $80 per hour or we have a flat rate price of $80 per fixture.

I believe a better term do distinquish between the two would be "Upfront Price" or "Fixed Price" not flat rate price.

Flat rate pricing is just a slang term used in the industry to give an upfront or fixed or final price to the customer before work is started.

Flat rate pricing systems are systems designed to make it easier to determine a final or fixed price, in the field, to give the customer before starting the work. (In the field Estimating System)

Maybe they should have called it an "Upfront Pricing System" instead of a "Flat Rate Pricing System".


[This message has been edited by A-Line (edited 09-25-2006).]

[This message has been edited by A-Line (edited 09-25-2006).]
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/25/06 05:22 PM
"It appears to me that LKs position is anytime you give a customer a set price ahead of time that is flat rate."

No not at all my position, i may quote T&M and give a not to exceed, or i may work up a contract price at the office, of i may have the electrician in the field, work up the contract price, in that case some would call it flat rate, when in fact it is simply a contract worked up in the field.

___________________________________________
Quote:

"Flat Rate" is a term used in many different ways in many different industries.

To each their own, I am certainly not suggesting anyone change their business practices.

I am trying to wake some up to the fact that the term "Flat Rate" is not the same to everyone and no matter how much you try you can not make it so.

Bob, i agree the term "Flat Rate" is not the same to everyone, and we hope this discussion, can help bring some light to the subject.
Posted By: Dnkldorf Re: Contract, Flat Rate, T&M. - 09/25/06 08:58 PM
I thought we had a discussion before about this, and we concluded we have 3 systems:

Flat rate
Bidding
T&M

All three have, or could have a definate contract amount somehow associated with them.

All three work, and make money, but only if done ethically and professionally.

Did we wander?




[This message has been edited by Dnkldorf (edited 09-25-2006).]
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/25/06 09:51 PM
IMO we have 2 methods,

T&M: which may be directly invoiced, or it may be offered with a contract, and terms.

Contract: a binding agreement with the scope of work defined, where all parties agree on the terms, and amounts.

Either of these, can be used to bid a project.


Flat Rate, just happens to be, a term pricing system sellers, use to market their estimating sheets, for preparing a contract.


Just as a side note, many fortune 500 companies, use the same type of estimating sheets, to generate their internal work orders.



[This message has been edited by LK (edited 09-25-2006).]
Posted By: mahlere Re: Contract, Flat Rate, T&M. - 09/25/06 10:18 PM
[q]Maybe they should have called it an "Upfront Pricing System" instead of a "Flat Rate Pricing System".[/q]

aline, all of our advertising is actually for "Upfront Pricing" We determined that flat rate was not as straight forward.
Posted By: dougwells Re: Contract, Flat Rate, T&M. - 09/25/06 10:35 PM
I use the Term Upfront Pricing in my Advertising too.
Posted By: TNSunny Re: Contract, Flat Rate, T&M. - 09/25/06 10:35 PM
That sure is a lot of posts - including my own - just to make the point that not everyone agrees on the definition of "flat rate." [Linked Image] In my personal opinion, I don't much care what you call it or how you do it as long as your making money. As others have pointed out, the business model for an industrial electrical company will not be the same as the business model for a residential service company. You have to adapt to your particular specialty, as well as your particular market area. As such, what one specialty contractor in one area calls "flat rate" will most likely differ from what another specialty contractor in another area calls "flat rate." All any of us can do is to explain how we use this particular term ourselves, rather than to try and project our opinion onto others.

For ME, T&M means "exact cost." Flat rate means "highly educated guestimate." Contract price means "any price I want it to be for any reason (even drawing a price out of a hat if I want.)"

For ME, these three terms could be further categorized at "T&M" and "Up-front pricing," as both the flat-rate and the contract pricing methods both give the customer the total price up front.

But again, that's just me. To each his own.

:-)

Kevin

P.S. In regard to itemized invoices...in my line of work it is rare that I would list over 7-8 items. Most invoices are 3-4.

Example: 1030 Fixture Change $65.00
1045 Incandescent 60W Bulbs $8.00
7500 Misc. Parts $5.00

If I'm building out a service or doing other work that will require a large list of materials and tasks, I then give what I call a "contract price."

Example: Install new 200-A aerial service with 200-A disconnect switch. $1700.00
Posted By: ExpressQuote Re: Contract, Flat Rate, T&M. - 09/26/06 01:12 AM
I appologize, this may have already been said, but I've been quite busy and have fallen behind in the threads.

My thoughts on Flat Rate vs Contract Price vs Fixed Bid:

A contract price is created by looking at the materials and labour needed to complete a project and then adding for overhead and profit to develop a fixed bid for a given project.

Flat rate is having contract pricing information broken down ahead of time in the form of unit prices (based on historical costs adjusted for the current costs of materials and labour)including overhead and profit to quickly develop a fixed bid for a given project.

A fixed bid (upfront pricing) is a price given to a customer in written or verbal form before work commences to indicate the cost to the customer so that they may make a value judgement as to the affordability of the project. As opposed to Time and Materials pricing where the customer doesn't know the actual final costs until after the project is completed.

Sorry, if I am repeating what has been said by someone else!

Just my opinion.

[This message has been edited by ExpressQuote (edited 09-25-2006).]
Posted By: PE&Master Re: Contract, Flat Rate, T&M. - 09/26/06 12:54 PM
I like to see all of us in a room someday debating this topic and sharing best methods of business operation. Now that'd be a meeting I'd look forward to!
Posted By: Rick Bruder Re: Contract, Flat Rate, T&M. - 09/26/06 12:58 PM
ExpressQuote is as close as I have seen with the difference between "flat rate" and "contract"

We use flat rate pricing on residential service and small commercial jobs. It is a pre-printed book listining all the seperate tasks and their corresponding prices for each task. The customer gets a written invoice from the tech before the work begins listing each task he will need to execute to get the job done right. This pricing is based on averages, so it may take a little longer to do the same thing in one house, but it will get done a little faster in another house. All in all,it evens out in the end. We have been using this system for a long time now and it works well for us.


With contract pricing, which we still use on occassion, I actually estimate the amount of material that I use and add in the labor that it will take on that particular job as well as my burden factors and profit to com up with a price to do the job. The customer gets a written proposal with a detailed scope of work, but only a lump sum of what the cost is.

We also still do a little, actually very little T&M work with large commercial and industrial customers, depending on the urgency. Sometimes time does not allow the privilege of giving the customer the cost up front.

That being said, I agree that all three will work and profits can are being made using all three methods.

This has been an interesting topic w/ alot of great posts and insight.
Posted By: Dnkldorf Re: Contract, Flat Rate, T&M. - 09/26/06 09:49 PM
Les, you know if we think about this, aren't all systems based on how long something would take, and what materials are used.

So on a stretch, we could say everything is T&M.
Posted By: LK Re: Contract, Flat Rate, T&M. - 09/26/06 10:38 PM
Dnk,

One way to understand flat rate, is, you do everything just as you would, when making up a contract, your scope of work, that you would put in the contract, is spelled out on the pre printed sheets, these sheets or pages, are helpful, for those, that may find estimating, either time consuming, or difficult, and would like to have a better way of pricing a job, and having more of those jobs making money.



[This message has been edited by LK (edited 09-27-2006).]
Posted By: electrictim510 Re: Contract, Flat Rate, T&M. - 10/16/06 09:37 PM
I found this earlier on in the topic under dnk's quote:

Here is an interesting quote, I don't know who said it.

"If you have to tell the world how great you are....your probably not"

The problem with this quote is . Customers want to know what sets you apart from "the competition" How else do you do so without lowering your rates? You tell them how you will do it better...usually. I do code corrections as 40% of my business on average and it's because I am better than the guy that was there before me(my opinion) but I get hired because I point it out. I often "boast of how good I am thats how I set myself apart. But I am not the best and will never say the best.I just think the comment is a little demeaning of techs with confidence in their work. If you don't have confidence in your work then you don't need to be doing the job at hand. This is why some guys rates are so low... no confidence. I will now stop going on and on about it.
© ECN Electrical Forums